Recently, there has been heightened interest in a possible anti-trust investigation of Monsanto’s seed & traits business (e.g. see #msg-43992457 ).
I have found a white paper written by Diana Moss of the Anti-Trust Instititue to be informative (see http://www.antitrustinstitute.org/archives/files/AAI_Platforms%20and%20Transgenic%20Seed_102320091053.pdf ). This paper was written in an effort to justify an antitrust ruling against Monsanto. However, in my opinion, her description of Monsanto’s competitive advantages makes a fairly strong case for investing in the company should the legal action be protracted or should it be resolved in Monsanto’s favor. In particular,....
...Monsanto has created formidable platforms of transgenic seed in cotton, soybeans, and corn through the control of a large body of patented technology and systematic acquisition of ISCs [independent seed companies]. Arguably, were it not for the early decision to broadly license its patented genetic traits technologies, Monsanto would control large, totally closed platforms in transgenic seed that could be challenged only by the unlikely emergence of rival platforms. Recent estimates indicate, for example, that Monsanto has a significant share of the innovation market for new field releases of transgenic varieties. The agricultural biotechnology giant also controls about 95 percent of the market for Bt [insect resistant] and Ht [herbicide tolerant] cotton traits, 97 percent of the market for Ht soybean traits, and on average, around 75 percent of the market for Bt and Ht corn traits (although depending on the trait, shares in corn traits can range close to 90 percent).....
Monsanto accounts for the majority of field releases for corn and soybeans over the last decade, with shares ranging to almost 80 percent at their peak in 2002, hovering around 70 for much of the 2000s and drifting down somewhat after 2005. The remaining players are relatively small (Syngenta, Pioneer, Dow, and Bayer) and each have shares of less than 10 percent for the bulk of the time period. During this time, Monsanto’s high market shares drove concentration levels to almost 6,000 HHI at their peak and maintained them in the 4,000 to 5,000 HHI range for much of the period. [I assume that HHI is the Herfindahl-Hirschman Index, a measure of market concentration].
It is instructive to note that Monsanto holds four of the 13 major, patented plant transformation techniques and technologies used in the agrobacterium-mediated transformation of plants. Those patents include the “agrobacterium co-transformation method” (divested to the University of California, Berkeley in the merger of Monsanto and DeKalb), the “particle gun electric discharge,” the “antibiotic resistance gene under control of plant promoter,” and “the CaMV 35S promoter.” Syngenta is the patent-holder on two techniques. Bayer, CAMBIA, Zeneca, and DuPont each hold one patent or an exclusive license, and universities account for the remaining two patents.
With respect to alleged anti-trust activities she states....
...various plaintiffs allege that Monsanto has monopolized markets for genetic traits by engaging in a variety of exclusionary practices, including exclusive dealing arrangements that penalize seed companies for licensing traits other than Monsanto’s. Also suspect are bundling agreements that financially penalize seed companies for selling less than a minimum percentage of seed containing Monsanto traits. These tactics include the use of contractual provisions that allow Monsanto to terminate an ISC’s trait license, thereby requiring the ISC to destroy its inventory of seeds containing Monsanto traits upon a change in ownership. Because the ISC’s lack of inventory would render the company worthless to a competitor of Monsanto’s, such provisions make it difficult for rivals to acquire ISCs and obtain economically valuable germplasm for introgressing traits to breed out new competing varieties.
Other alleged anticompetitive tactics include anti-stacking restrictions in licenses, which are described in the antitrust counterclaim in Monsanto Co. vs. E.I. DuPont de Nemours and Co. Also cited are joint venture agreements that restrict the licensing of one partner’s technology outside the agreement, thus impeding rivals’ access to that technology for the purposes of developing competing products. In its counterclaim regarding the recent agreement between Monsanto and Dow to create a stacked, 8-gene corn seed, DuPont alleges that Dow is prohibited from permitting Pioneer to sub-license its Herculex insect resistant trait to ISCs. Such exclusive licensing arrangements could act to delay the entry of alternative transgenic varieties. The result of such alleged exclusionary conduct is to restrict competitors' ability to license traits from companies other than Monsanto or its affiliates and limit competitors' ability to distribute seeds with competing traits.
AI
